Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,847 posts, read 58,440,876 times
Reputation: 46393
Advertisements
I am still ~ 10 yrs from SS / Medicare so even tho 'retired' for 8 yrs already, I still strategize for tax deferral / planning. Most often it is choosing between a ROTH contribution or taking the 'credit' for a traditional IRA contribution. I still have plenty of deductions and this yr even some 'earnings' My effective rate is 9% with NO traditional IRA credit or 8.07% with a Traditonal IRA credit (which I will owe tax later UNLESS I gift out of my Traditional IRA). If I contribute a few thousand to IRA now, I see a decent 25% 'return' on that investment by imediate tax savings (?). (here we go again... spending a few thousand to save a thousand)
Future Tax... Will it be more than 9%?, maybe I can better manage it than the Gov getting it TODAY. MAYBE... the way the Gov is headed, we (USA) will be seeing 30% + in the future.
Since Effective tax rate has MANY definitions I will use; Total tax due Divided by Adjusted Gross Earnings i.e. $50k / $5k taxes = 10% Effective tax rate.
What does your crystal ball say your Effective Tax Rate going forward will be?
<10%
10-15%
16 - 20%
20-30%
30% +
Last edited by StealthRabbit; 03-12-2013 at 11:15 PM..
Relatively few states have no income tax, therefore most of us also pay state income taxes. Therefore, when I voted in the poll I added my 5% California effective tax rate (as defined by the OP) to my federal rate. I don't know if that was the intent of the original post, but to me income taxes are income taxes so looking at the total makes more sense than looking at the federal rate only.
Stealth: My Chrystal Ball is hoping its under 10%. We plan on workinga little, SS income for both my wife and myself, a small pension for me. Residency in Texas means no personal income tax so all I have to worry about is The Feds. I'm figuring that if I live on a budget, I will live pretty much under the tax radar screen. If I have high income one year, I'll leave all my money in IRA's that year. I have IRA and non-Ira savings, so I can tap one or the other depending on circumstances.
Maybe I am missing something but it seems a large factor in this issue is what your AGI/deductions will be. We have one of the most progressive tax systems in the world and I don't expect that to change. My effective tax rate jumped in the last year as I had to take higher distributions from the IRA to cover medical expenses, which raised the AGI, which lowered the amount of medical that is deductible, which combined to raise the effective tax rate.
With a dividend tax rate at zero my tax rate for the feds has been zero for 2 years. That is with withdrawals for living expenses, a transfer from TIRA to Roth, and some capital gains from investments.
I expect it to go up when I start receiving social security. My schedule A deductions will go down around then too.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,847 posts, read 58,440,876 times
Reputation: 46393
Quote:
Originally Posted by cdelena
...a large factor in this issue is what your AGI/deductions will be. We have one of the most progressive tax systems in the world and I don't expect that to change. My effective tax rate jumped in the last year as I had to take higher distributions from the IRA to cover medical expenses, which raised the AGI, which lowered the amount of medical that is deductible, which combined to raise the effective tax rate.
CD - Yes, you are so correct.. (one of many cache-22's of IRS 'progressive' tax). So sorry to hear of your extra medical expenses needing to be paid from taxable IRA. Probably not your plan yrs ago when you were contributing to IRA.
Quote:
My schedule A deductions will go down around then too
another dilema for me going forward, as Std Deduction takes the place of Itemized. (no mortgage, and Contributions done through my family foundation, property taxes @ $14k are still more than Std Deduction)
ER - Thx for adding your State tax. It is a significant expense in several states that have low income thresholds for taxation, and certainly to be figured into future tax issues for retirees.
Whoops, messed up the formula $5k tax due / $50k AGI. I do appreciate tax software checking my math...
I hadn't thought about the sudden medical expenses affecting the tax rate because of necessary IRA deductions. Hope I remember in years future to withdraw IRA money whenever possible in low tax years, even if I don't need the money for spending money.
I am in a state with an Income tax. However as a military retiree on US Navy pension, my income is far below the minimum bracket. So I pay no income taxes.
My pension is 'taxable', but I am not wealthy enough to be taxed. If I tripled my pension, then I may become wealthy enough to begin paying income taxes.
Just because you live in a state with an income tax, does not mean that you pay income taxes.
I suspect that tax-rates will go up. Will the minimum-brackets change? I doubt it.
My Dw on the other hand, was working p/t and our combined income was still too low to become taxed. Recently she was promoted and changed to f/t, now our combined income is high enough to be taxed. Once she retires, then her income will drop again, and our combined income will again be un-taxed.
In our case, it is only a part of her income that is taxed, and that is only because she became too wealthy with her latest promotion.
Once we are both retired, it will not be an issue.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
My effective rate is 9% with NO traditional IRA credit or 8.07% with a Traditonal IRA credit (which I will owe tax later UNLESS I gift out of my Traditional IRA). If I contribute a few thousand to IRA now, I see a decent 25% 'return' on that investment by imediate tax savings (?). (here we go again... spending a few thousand to save a thousand
)
Will it be more than 9%?, maybe I can better manage it than the Gov getting it TODAY. MAYBE... the way the Gov is headed, we (USA) will be seeing 30% + in the future. 
What about state income taxes?
)
